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Wednesday, 13 May 2020

Asian Bamboo looking back

My, without doubt, biggest financial mistake was made with a fairly young company, working in an old line of business and being based in China.

Asian Bamboo is now since 205/2016 bankrupt and for that reason I decided to go back to all the annual reports to read them again to see if I would today, hopefully knowing a bit more, have done something differently. Interestingly enough, Asian Bamboo was bankrupt, had no CEO, no board and yet it was still being traded on the stock exchange in 2016 as if it had a 1.5 million euro market capital (it has now been removed!). The company had many similarities to surströmming... besides from the taste that is.

Actually one should dig into all the Chinese companies that had their IPO in Germany since around 80% of them have gone "bankrupt", by now closer to 95%! Unfortunately I do not have the time for that but I did own Asian Bamboo so there my interest is large enough for me to spend time on it. This time I also had to spend to make sure to really rub some salt into the wounds.

Strange things that should have opened my eyes are mentioned below. Some of them I did react on when reading the reports but I kept pushing them away that the Norwegian oil fund held shares in the company gave me a false sense of security:

Very high payments for leasing the bamboo forests

The forests kept going to maturity with increasing value even though they claimed to harvest the forest

Largest parts of profit was from rewriting the value of the bamboo forest that they were leasing (not even owning it, which does not really matter because the value of course still increase but still...)

I was in touch with their CFO asking who their competitors were and got the answer back that they did not have any. Yeah, right. This guy actually told me to get out with that answer and I failed.

Kept flipping the costs between reports from being non cash flow influencing to being cash flow influencing. I still claim here that the auditing company that allowed this to happen should be sued by all the investors.

Having a company in between Germany and China in Hong Kong that was a mailbox company with an oddly structured ownership that made no sense.

In the end my conclusion has been that I will simply not invest in a company that are not obliged to follow rules and regulations similar to what I am used to. This translates into only owning North American and European companies. Additional, I'm not allowed to allow myself some false sense of "security" based on other (famous) investors owning shares in the companies that I also own. It is irrelevant. The investment can often, in the grand scheme of things, mean nothing to them but it means a lot to me!

My first investment was made in 2012 and my final 11 months later in 2013. In 2015 I finally sold the shares with an overall loss of -5,783 €.

I currently have similar but unrealised losses in DB and Coba both companies were initially, just like Asian Bamboo, bought in 2012 when I started investing.